Vietnam Coffee Harvest May Drop 30% on Drought, Vicofa Says

Bloomberg News

March 11, 2013, 6:29 AM EDT

The coffee harvest in Vietnam, the biggest grower of robusta beans used by Nestle SA in instant drinks, may decline for second year because of drought in the main growing regions, according to a producers’ group.

Output may drop 30 percent in 2013-2014, Luong Van Tu, chairman of the Vietnam Coffee & Cocoa Association, or Vicofa, said yesterday, without giving a specific forecast. Production fell 25 percent in 2012-2013 from 1.5 million tons a year earlier, he said. A Bloomberg survey published on March 7 estimated the 2012-2013 crop at 1.43 million tons.

Reduced supplies from Asia may boost robusta prices for a second year. Exports from Indonesia, the third-largest shipper, are falling because of higher domestic consumption, a Bloomberg survey showed last month. Global usage of robusta has expanded as demand has dropped for the costlier arabica beans, brewed by Starbucks Corp., according to Macquarie Group Ltd.

“There are already tens of thousands of hectares that have no hope in the next coffee season,” Tu said at an industry conference in Buon Ma Thuot City. For other areas, the beans will likely be small, he said.

Robusta futures rallied to $2,188 a ton on NYSE Liffe on March 8, the highest intraday level since Oct. 4. Most-active prices have advanced for three weeks, taking gains to 13 percent this year. They gained 6.3 percent in 2012.

More Severe

Drought in the central region covering five coffee-growing provinces, including Dak Lak, will continue and may become more severe, the National Center for Hydro-Meteorological Forecasting said on its website March 5. Trees in Vietnam usually flower and form fruit between January and March, according to growers.

“I think the next crop will decline, but it’s too early to tell by how much,” said Le Tien Hung, Dak Lak-based deputy director of Sept. 2nd Import-Export Co. New trees, planted to replace old ones, are probably more drought resistant, he said.

The harvest that began in Vietnam in October, the 2012-2013 crop, may have dropped 13 percent from a record 1.65 million tons a year earlier, according to the Bloomberg survey on March 7, which showed farmers withholding sales amid the drought. The premium on beans for shipment from the country in April or May that’s paid on top of the NYSE Liffe price has doubled to $50 a ton over the past week, Volcafe Ltd. said in a report on March 8.

Beans in Dak Lak province, which supplies about a third of the crop, cost 42,700 dong ($2.04) a kilogram (2.2 pounds) on March 6, data from the Daklak Trade & Tourism Center show. The price rose to 43,200 dong on March 5, the highest since Oct. 3.

The Ministry of Agriculture and Rural Development will compile and propose to the prime minister measures to assist coffee farmers in dealing with drought, Minister Cao Duc Phat said at the conference. The ministry also plans to establish a coffee-management board, he said, without providing details.

Indonesian Exports

Exports from Indonesia may decline to a two-year low as increasing domestic consumption erodes supplies from a record harvest, according to the survey published Feb. 28. Shipments will total 450,000 tons in the 12 months starting April 1. That’s 7.4 percent less than sales of 486,000 tons this year, according to U.S. Department of Agriculture data.

Global robusta usage rose 11 percent in the 12 months to September as arabica consumption fell 6.2 percent, Macquarie said in January. Instant-coffee demand will grow 6.5 percent from 2012 to 2017, more than the 6 percent growth forecast for the roast and ground market, J. Ross Colbert, global strategist of beverages at Rabobank International, said at a meeting of the International Coffee Organization in London on March 5.

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